State ownership and firm value: simultaneous analyses approach
Purpose The purpose of this paper is to investigate the endogeneity effect of state ownership on firm value in Indonesia. Design/methodology/approach Using a sample of 139 Indonesian non-financial listed companies from 2009 to 2013, this study uses two-stage least square (2SLS) methods. Findings The results of 2SLS show that state ownership as “continuous measure, dummy variable and after adjusting the outliers” are negatively and significantly influenced firm value, implying that state ownership tends to lower firm value. Moreover, the results also show that U-shaped effect of state ownership with firm value, implying that the size of shareholders by state increases, firm value initially decreases and then increases. Practical implications The study intends to provide the shareholders, managers and investors with clear guidance before their investment decisions. Social implications This paper provides evidence that the agency costs may increase in firms with state ownership share. Originality/value This is the first paper contributes to the corporate governance literature by investigating the endogeneity effect between state ownership and firm value using 2SLS method in Indonesia.